North Carolina is not a community property state. Instead of automatically presuming that all property acquired during a marriage is owned equally by both spouses, it employs a system of equitable distribution to ensure a fair division of assets and debts in a divorce.
Understanding Community Property
To understand North Carolina’s system, it helps to first know what it is not. In community property states, assets and debts acquired during the marriage are considered to belong to both spouses equally. Upon divorce, the marital estate is typically divided 50/50, based on the principle that marriage is a joint undertaking.
While this method offers a predictable outcome, it allows for little flexibility if a 50/50 split might seem unfair. Only a minority of states follow the community property model.
North Carolina’s Equitable Distribution System
North Carolina is an equitable distribution state, a system governed by North Carolina General Statute § 50-20.1North Carolina General Assembly. G.S. 50-20 The principle of equitable distribution is fairness, which does not always mean an equal 50/50 split. The law presumes an equal division is fair but allows judges to deviate from that standard if an equal split would not be equitable.
This approach views marriage as an economic partnership. The process is initiated when a party files a claim for equitable distribution after separation but before the final divorce decree is entered, allowing courts to tailor the property division to the unique facts of each case.
Defining Marital and Separate Property in North Carolina
The process of equitable distribution begins by classifying all property owned by the couple into one of three categories: marital, separate, or divisible. Marital property includes all real and personal property, from pensions to bank accounts, acquired by either spouse during the marriage and before the official date of separation. It is presumed that any property acquired within this timeframe is marital, regardless of whose name is on the title.
Separate property belongs to one spouse alone and is not subject to division. This category includes all assets acquired before the marriage, as well as property received as a gift or inheritance by one spouse individually during the marriage. For a gift from one spouse to another to be considered separate, the intention must be clearly stated in the conveyance document.
North Carolina law also recognizes a third category called “divisible property.” This includes changes in the value of marital property that occur after the date of separation but before the property is distributed, such as appreciation or depreciation of investments. It also covers assets that were earned during the marriage but received after separation, like a work bonus or commission.
How Property is Divided Under Equitable Distribution
A judge must consider several factors when determining whether to order an unequal distribution, and the party arguing for an unequal division has the burden of proving why it would be fairer. These factors include:
- The income, property, and liabilities of each party
- The duration of the marriage
- The age and health of both spouses
- Any obligation for support from a prior marriage
- A spouse’s contributions to the other’s education or career
- The need for a custodial parent to remain in the marital home
- Any direct contributions that increased the value of separate property
A judge has the discretion to give more weight to certain factors based on the evidence presented.
Agreements Affecting Property Division
Spouses in North Carolina can decide how to divide their property themselves, which overrides the state’s equitable distribution laws. This is accomplished through legally binding contracts such as prenuptial agreements, postnuptial agreements, or separation agreements that allow couples to maintain control over their assets.
Prenuptial agreements are created before marriage and are governed by N.C.G.S. Chapter 52B. Postnuptial agreements are made during the marriage, while separation agreements, authorized under N.C.G.S. § 52-10.1, are created when spouses decide to live apart.2North Carolina General Assembly. G.S. 52-10.1 For any of these agreements to be enforceable, they must be in writing and signed by both parties.